THE STATE OF THE PENNY STOCK UNION

Tom McCarthy Pre Promotion Stocks

Tom McCarthy Pre Promotion Stocks

Historical Timeline
Penny Stocks

1900-2008
Pre-Web 2.0 Stock Promoters Heyday • Boiler rooms • Bre-X to $300 • The wild, wild west

2008-2011
Pre-Pump Crowding Web 2.0 & the OTC Market • • • • Tighter U.S. regulations Promotion costs surge Social media revolution Death of Mister X

#PSC2012
2012 Year In Review Year of the Promoter  APS around the world  Revolutionary promotion  Counterfeits, boiler rooms, text messaging & SPAM

2013
2013 & Beyond
????????????  Tighter regulations  Guerilla promotions  Foreign market entry

• PrePromotionStocks on http://profit.ly • Former stock promoter (2004 – 2010) • Trades pre / active stock promotions [LONG BIAS] • $208k in 1.5 years, 68% win rate, 21% average gain • Generated ~74% of profits in 5% of total trades

Tom McCarthy Pre Promotion Stocks

TICKER: ABOT NSRS

$P&L: $39,208 $25,074

%P&L: 29.25%

BUY: $0.1911

SELL: $0.247

ENTRY: 12/17/11

EXIT:

STRATEGY:

101.33% $0.0225

$0.0453 12/16/11

12/19/11 confirmed 12/18/11 confirmed

MILV SNPK CTDT
SEFE RARS TBBC RAYS VKMD AVERAGE:

$20,013 $17,600 $10,873
$10,200 $10,148 $6,496 $6,159 $4,028 $14,979

35% 25.4% 42.08%
48.3% 10.5% 17.61% 27.53% 33.99% 32.17%

$0.051 $0.354 $0.12
$1.01 $0.485 $1.32 $1.19 $0.158

$0.069 $0.444 $0.166
$1.497 $0.536 $1.547 $1.52 $0.212

10/26/11 3/8/12 7/9/12
3/28/11 5/9/12 5/13/11 10/10/11 9/6/12

11/4/11 3/8/12 7/9/12
4/25/11 5/9/12 5/31/11 9/6/12

confirmed confirmed confirmed
pre confirmed confirmed confirmed

10/30/11 pre

TICKER: DIMI JAMN

$P&L: ($4,317) ($3,648)

%P&L: (39.99%) (15.56%)

BUY: $1.08 $1.11

SELL: $0.648 $0.94

ENTRY: 6/14/11 5/18/11

EXIT: 6/14/11 5/18/11

STRATEGY: pre conf’d dip

AWSR LTSN EVGI
MDMC HDSI EAPH NECA LBGO

($3,300) ($1,810) ($2,170)
($2,050) ($2,122) ($1,377) ($1,021) ($1,050)

(15.56%) (16.64%) (13.96%)
(49.4%) (13.1%) (26.64%) (28.57%) (7.58%) (18.32%)

$1.71 $1.08
$0.83 $0.05 $0.35

$1.05 $0.902
$0.42

2/23/12 1/10/12 10/19/11
3/19/12 8/22/11 10/5/11 6/18/12

2/24/12 1/18/12
3/30/12 8/22/11 8/25/11 6/18/12

confirmed pre
pre confirmed pre confirmed

$0.511 $0.44
$0.323 $0.281 $0.25

10/19/11 confirmed

$0.0367 8/17/11

10/27/11 pre

$1.065 $.985

AVERAGE: ($22,865)

• ABOT annotated chart showing buy, sell, how much $ left on table

The Lifecycle of a Stock Promoter Inevitably Leads To First In, First Out (“FIFO”) Trading
The “Mister X Effect” • FCPG: 31 days • HHWW: 24 days • KNKT: 24 days • ALZM: 14 days • AVVC: 0 days • WTFS: 0 • WSML: -1 aka  • RETIREMENT (or re-branding???)

The "Mister X" Effect Leads To “Stock Psycho” Results


Campaign duration from launch to peak goes from weeks to a few minutes Traders understand that the only way to profit is to be First In, First Out. Examples include PennyStockAlerts.com & XTremePicks.com (duration < 15 min)

The Lifecycle Of A Penny Stock Promoter

• •

Direct correlation between how fast information flows and the duration of a promoter's lifecycle As a promoter reaches the maturity phase, either start trading F.I.F.O. or risk getting RARS’d

OTCBB $Volume Is At A 10-Year Low

1. How did we get here? 2. Where are we headed next?

Stock Promotion In The Early-To-Mid 1900's:

• • • •

Person-to-person or snail mail promotions All buyers were suckers Promotions lasted 1-10 years or more o Buyers very spread out (polar opposite of today's OTC market) Difficulty monitoring stock manipulation meant little/no regulation

Boiler Rooms: 1980-2000
"Chop stocks" (bought at a large discount) made up perhaps half the 1997 85 million-share daily volume of the OTC Bulletin Board.“
-Gary Weiss, BusinessWeek December 15, 1997


• • •

SOURCE: http://prepromo.co/chopstocks-businessweek

Technology and deregulation In-house "chop stocks" Promotion was done over the phone - easy to turn the faucet up or down Establishing trust over the telephone paved way for the Wall Street "pitchmen"

"The regulators have always seemed to be a day late and a dollar short--or perhaps more accurately, years late and billions of dollars short." -Gary Weiss, BusinessWeek

The Winners of the New World
TheStreet.com, February 29, 2000.
“…you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can’t make money for you anymore, and that is all that matters,” –Jim Cramer

The Wild, Wild West (“WWW”)

'Golden Age' for Stock Promoters:
o Physical brokers were replaced - no longer able to dissuade clients from buying worthless chop stocks o very few sources of information o Uneducated traders bought anything (even what a 14 year old kid was touting)

"All over the country there are complete fools hunched over computer screens imagining they're Wall Street tycoons."
-Jonathan Schwartz, Caviar Crimes

Information Imbalance

• •

Imbalance in the supply & demand for information targeting stock traders People wanted "stock picks" - S.E.C. filings were for losers (remember Cramer) so ideas came from poor sources:
o Press releases flooded w/ ticker spam o stock forums on Prodigy & AOL, yahoo finance, ragingbull, siliconinvestor, iHub o email newsletters: HotOTC, "Stock-Dogs"

Information Imbalance
• •
Stock promotion was incredibly cheap Ticker-tagged news w/ good story = 7-figure $volume

o Tim's An American Hedge Fund book explains the early online stock days o Scam Dogs and Mo-Mo Mamas by John Emshwiller does too (talks about Janice Shell)

Stock Promotion: 2008-2011

more regulation o try depositing a cert! 2011 S.E.C. Roundtable: o DTC proactive w/ "chills“ OTCBB Liquidity decreasing o 2008 $vol fell 58% vs. 2007, sharpest recorded YoY decline (hasn't recovered - will hit new lows in 2012) Unlike years prior, news releases no longer moved penny stocks. o Promotion is the lifeblood of the penny stock market.


Pre Promotion Stocks launched in Fall 2010

Stock Promotion: 2008-2011

• •

Social media and Web 2.0 enable mass communication in real-time Traders becoming smarter More accurate content about penny stocks on the internet Teachers emerge and fill the need to publish accurate information about trading Real-time chatrooms become very popular


• •

A stock promotion campaign’s duration from launch till peak continues to decrease over time because there’s more traders and less long-term investors.

Stock Promotion: 2008-2011

• • •

Stock promotion becomes more expensive as liquidity dries up o Rebirth of hard mailers Market maker participation* o AYME w/ MSEH/NXTH? o WDCO w/ APS? EquityFeed / EDGAR relatively unknown to traders Stock could trade $500k intraday & stay under radar Speculators not actively digging through S.E.C. filings to “connect-the-dots”

• •

*The comments above merely reflect the opinion of the presenter and are based on his experiences watching real-time Level 2 activity. There’s no concrete evidence to prove that market makers collude with stock promoters.

Stock Promotion In 2012

• •

Year of the Pre-Promotion Knowledge of stock promotions hits an all-time high PPS™ distribution increased w/ the profit.ly launch Tim’s popularity has a trickle down effect onto Michael Goode (brilliant teacher) IL, ATA & NoDummy

• •

• •

Promoting the promotion o BestDamn, StockHaven, Leslie Howard, APS Tim's industry revolution o power of affiliate marketing

Stock Promotion In 2012

Desire for traders to be the very first to “get in” had caught like wild fire

Greater Fool Theory:

• • •

“I know it’s a scam stock but I can still get in & out fast and make a profit.” Result: Very crowded trades B.C. (Before Crowdedness) & A.N.D. (After NoDummy)

Stock Promotion In 2012

Branding is everything
o

Stock spammers able to build brand equity AtomicPennies able to develop a brand without spending big $$$ Doesn’t matter what is being promoted… just who is promoting

o

o

o

OTC Clean Up o Record # of stock halts w/ OTC’s moving to gray sheets

Stock Promotion In 2012
• There's APS & the rest • APS in maturity phase of
the promoter life cycle

• Besides APS, most big %
gainers were uncrowded, overlooked promotions

• Traders always craving for
“the next XYZ”
o o o

o
o o o o

SEFE: “The Next LEXG” PUNL: “The Next IDNG” STNT: “The Next STEV” ORYN: “The Next STEV” TFER: “The Next JAMN” SYNC: “The Next BVSN” PSON: “The Next LUXR” ????: “The Next LEXG”

“The next XYZ” will almost never match the performance of “XYZ” because the trade becomes incredibly crowded from very early on.

Stock Promotion In 2012
• EquityFeed + Twitter +
Chatrooms + Herd Mentality = insta-volume

• Friday Fakeouts • Chart setups look similar
to former “big ones” • Speculators jump in and get slaughtered

• Resurgence of stock spam
(now w/ counterfeiting!) • What you think is an email about a new “pick” from APS could be from somebody like mafiaxxx or orbitstocks.com

Stock Promotion In 2012
• Deal-guys adapt to early speculators w/
new charts:

• DIMI, PUNK & XRMB: rug pull, buy
back & low-volume breakout

• SEFE: PennyStockWizard • GWBU: APS w/o fresh chart • STEV: 2nd round mailer • CLSR: unknown “incher” w/ high price
per share

• CTDT: blocks + downtick for weeks prior
to promotion

• MDMC: Big group hits a former $1
mailer stock

Future Trends

Cat & Mouse Games – Adapt & Readapt o Between regulators & promoters o Between promoters & early speculators

New Brands Emerge More Frequently TBX / "Wizard" o Start new brand & launch promo (few will buy). If it's a successful promo that new brand's equity shoots up (the Wizard model) o Spam emails using existing lists but sent from a new "persona" + successful campaign launch = spike in that new list's "health"

Future Trends
Globalization


Increase in U.S. regulation will lead to promoters moving into international markets w/ few regulations (since they're still in their infancy)
Market participants from around the globe will be able to buy stocks trading on any intl. exchange

Future Trends
• •
New media outlets o How long till a pump iPhone / Android App? Uncompensated opportunities o Well-respected entrepreneurs like James Altucher will have an even greater influence on stock prices when publishing articles o While certainly not a well-respected organization, look what the "NIA" has been able to accomplish by playing on people's fear (as opposed to greed).

One Thing That Won't Change
Having your finger to the pulse of the penny stock market at all times… • Will make you a smarter trader today; and

Will help you develop an intuition to spot changes in the constantly evolving market environment

One Thing That Won't Change
"I think honestly one of the issues [for missing opportunities] is not being in the know... Nate banks on these because he has his finger to the pulse... ...You take a guy like Nate, he is on every stinking list on earth and he has tracked every one of them, he knows which is a big group, a pre-big-group, a small group, a mailer, an e mail blast... he's tracked these bastages to the point he can nail them pretty big."

-”harbs” on iHub, April 7 2011
SOURCE: http://prepromo.co/harbs-pulse

Sneak Peak Into The Future?

KEEP YOUR FINGER TO THE PULSE OF THE MARKET!
Tom McCarthy Pre Promotion Stocks

Tom McCarthy Pre Promotion Stocks

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